Longevity Risk-Sharing Annuities: Partial Indexation in Mortality Experience

Zhang Saisai and Li Johnny Siu-Hang ()
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Zhang Saisai: Statistics and Actuarial Science, University of Waterloo, 200 University Ave. W., Waterloo, Ontario N2L3G1, Canada
Li Johnny Siu-Hang: Statistics and Actuarial Science, University of Waterloo, 200 University Ave. W., Waterloo, Ontario N2L3G1, Canada

Asia-Pacific Journal of Risk and Insurance, 2017, vol. 11, issue 1, 30

Abstract: In a conventional fixed annuity, idiosyncratic risk is diversified away while systematic longevity risk is borne entirely by the provider. The mortality-indexed annuity on the other hand, transfers systematic longevity risk completely back to the annuitants by fully adjusting benefits to mortality experience. In this paper, we propose the partial mortality-indexed annuity (PMIA), which aims to seek a balance between the two ends of the risk-sharing spectrum. Through a simulation study, we show that the PMIA achieves risk sharing and benefits both the provider and the annuitant.

Keywords: longevity risk; product design; risk sharing (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/apjri-2016-0023

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